Maximizing Home Purchase Potential for Self-Employed Individuals

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Are you a self-employed individual dreaming of owning your own home but worried about how to navigate the mortgage process?

Don’t fret!

Despite the complexities, there are strategies you can employ to enhance your purchasing power and make that dream home a reality.

Understanding Self Employed Income Mortgage Evaluation

Traditional methods of income evaluation for self-employed individuals differ from those of salaried employees.

While the latter can simply provide pay stubs and employment letters, the former must navigate a more intricate process.

For self-employed individuals, lenders typically assess a two-year average of income based on filed tax returns. This method offers flexibility, particularly if your income is on an upward trajectory.

If your business is incorporated and you draw a salary, this two-year average remains the norm. However, for sole proprietors, there’s an opportunity to boost income by 15% or addback things like motor vehicle expenses, capital cost allowances and business use of home.

These adjustments acknowledges the various write-offs available to self-employed individuals, ultimately enabling a higher budget for home purchases.

Exploring Stated Income Mortgage Options

For those with newer businesses or irregular income streams, the conventional two-year tax return requirement might not quite get you where you need to be.

However, there’s a viable alternative: stated income.

Many lenders are willing to consider applicants with as little as three to six months of bank statements.

By extrapolating a reasonable income from these statements and factoring in industry-specific expense percentages, you can establish a qualifying income for mortgage purposes.

This approach often yields a higher income figure than conventional methods, thus expanding your purchasing potential significantly.

Unlocking Your Homeownership Journey

Navigating the mortgage landscape as a self-employed individual may seem daunting at first glance. However, armed with the knowledge of income evaluation methods and alternative options like stated income, you can confidently embark on your homeownership journey.

Remember, each individual’s financial situation is unique, and it’s crucial to consult with a knowledgeable mortgage broker who can tailor solutions to your specific needs.

By leveraging these strategies, you can maximize your home purchase potential and turn your homeownership dreams into reality.

Conclusions and Further Thoughts

Contact Huber Mortgage to talk through your options!    Over 50% of my clients are self-employed! Contact HERE.



PS – One of my hobbies is blogging about mortgages, debt and government policy.  During the day I’m a MORTGAGE BROKER in Kelowna, BC!

Check out the Huber Mortgage Home Buyers Guide HERE

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